Prather Company owns 80% of the common stock of Stone Company. The stock was purchased for $960,000 on January 1, 2009, when Stone Company's retained earnings were $675,000. On January 1, 2011, Stone Company sold fixed assets to Prather Company for $960,000; Stone Company had purchased these assets for $1,350,000 on January 1, 2001, at which time their es timated useful life was 25 years. The estimated remaining useful life to Prather Company on 1/1/11 is 10 years. Both companies employ the straight-line method of depreciation.

The financial data for 2012 are presented here:

Required:
A. Prepare a consolidated statements workpaper for the year ended December 31, 2012.
B. Calculate consolidated retained earnings on December 31, 2012, using an analytical or t-accountapproach.

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Prather Company Stone Company Sales Equity in Subsidiary Income $1,950,000 240,000 2,190,000 1,350,000 225,000 1,575,000 615,000 $1.350,000 Total Revenue Cost of Goods Sold Other Expenses 1,350,000 900,000 150,000 1050,000 $S00,000 Total Cost and Expense Net Income 1/1 Retained Earnings Net Income Dividends Declared 12/31 Retained Earnings 1,505,400 615,000 150,000 $1,970,400 $1,038,000 300,000 75,000 $1,263,000 498,000 1,430,400 2,168,100 900,000) $8,196.500 $225,000 Inventory Investment in Stone Company Fixed Assets Accumulated Depreciation Fixed Assets 2,625,000 (612,000) $2,238.000 Total Assets Liabilities Common Stock Retained Earnings 465,600 760,500 1,970,400 $3,196,500 450,000 525,000 1.263,000 $2,288,000 Total Liabilities and Equity